Paying for Extra Airline Rewards Rarely Pays Off
By Eva Norlyk Smith Ph.D.
December 27, 2012
What do I need to know about different fare options? I have rewards cards for Southwest and American Airlines. In the two years since I’ve had these cards, I’ve always just booked the cheapest fare and totally ignored the more expensive “Anytime” fares for Southwest (AA has “Choice Plus” now). But it looks like I might earn extra miles by booking those more expensive fares. So should I be booking them to get extra points? — Tony
Airlines are increasingly rolling out different fare options to cater to different consumer tastes. For some airlines, as you have observed, this includes major changes in the way frequent flier rewards are awarded. Southwest has changed its frequent flier program so that it now awards points based on the fare a passenger pays rather than the miles flown. Other airlines, like JetBlue and Virgin America have followed suit and reward miles in terms of dollars spent.
As for American, it recently started displaying four fares for people booking online. In addition to business class, it now offers the Choice fare (the economy option), the Choice Essential fare (which, for a fee of $68, includes a checked bag, priority boarding and no change fees), and, finally, the Choice Plus option. Choice Plus costs $88 more than the Choice Fare and gives you a 50 percent AAdvantage mileage bonus (not elite qualifying miles though).
So which is your best choice? Think of it like shopping for cars. We all want that BMW convertible with all the extras — but you don’t buy a fancy car unless it makes sense for your household budget. Let’s take a look at the different fare options and the extra value they offer, so you can see if it’s worth paying for.
In the case of Southwest airlines, you can choose between three fare options: Business Select, Anytime and Wanna Get Away (the lowest-cost option). Prices vary considerably. For a round-trip flight from Chicago Midway to Fort Lauderdale in January, you’d pay around $978 for an Anytime fare and as little as $260 for the Wanna Get Away fare difference of more than $600.
What do you get for those extra dollars? Both the Business Select and Anytime Fares are fully refundable if you cancel your trip. You can even make changes to your ticket the day of travel without penalty.
They also boost your rewards earnings. The Business Select and Anytime fares apply a multiplier of 12 and 10 to the base fare, respectively. Multiply the fare by that number, and that’s how many rewards miles you get. For the Wanna Get Away fare, the multiplier is just six. That means, for the $978 Anytime fare, you’d be earning 9,780 frequent flier points. Meanwhile, the Wanna Get Away fare points earnings are 260 times 6, or 1,560 points.
What are those extra points worth? Well, it depends on how you redeem them. Looking at the same route, if you were to pay for the Anytime fare in frequent flier points, you’d use up 95,600 points for a round-trip ticket. That pegs the value of the points at around roughly one cent per point.
There is one more step to find the value of those extra points earnings. By buying the Anytime Fare ticket, you earned 8,220 more points than you would have earned with the economy fare (9,780 points minus 1,560 points). At one cent per point, that adds up to an $82.20 extra value in rewards earnings with the Anytime Fare ticket. Don’t forget, though, that you had to pay $718 more in airfare ($978 minus $260) to get those extra rewards.
Now, you could also use those points to book a cheaper Wanna Get Away fare. In that case, you’d be getting one leg of your round trip free (one-way fares for the route in question cost about 9,300 points). However, that fare would cost you only $170. And, remember, you paid $718 extra for those extra points in the first place. No matter how you look at it, that hardly qualifies as a good deal.
For the Choice Plus option for American Airlines, the picture is not much better, but do the math, then decide.
Of course, if money is not an issue, you might like pricier fares just for the added travel perks and benefits they provide — just as anyone with money to burn would likely opt for that brand-new Bimmer over a sensible used Toyota Corolla.
Got a question for Eva? Send her an email.